What is a sole trader?

A sole trader is simply someone who runs their own business as an individual. You and your business are treated as the same thing legally — there’s no separate company.

The good parts: it’s simple to set up, you keep all your profits after tax, and you’re your own boss.

The thing to be aware of: because you and the business are one and the same, you’re personally responsible for any business debts. (This is different from a limited company, where the business is its own legal “person.”)

One point that confuses a lot of people: when you “register as a sole trader,” you’re not registering a company with Companies House. You’re simply telling HMRC (HM Revenue and Customs — the UK’s tax office) that you’re self-employed. You do this by registering for something called Self Assessment.

Do you actually need to register?

You must register as a sole trader if any of these apply to you:

• You earned more than £1,000 from self-employment in a tax year (a tax year runs from 6 April to 5 April).
• You need to prove you’re self-employed — for example, to claim Tax-Free Childcare.
• You want to make voluntary Class 2 National Insurance payments so you stay on track for benefits and your State Pension.
• You need to register as a subcontractor for the Construction Industry Scheme (CIS), or as a share fisher.

If you earned under £1,000 from self-employment in the tax year, you usually don’t have to register at all — that’s covered by what’s called the trading allowance. But many people choose to register anyway if they want to claim business expenses or prove their self-employed income (handy for things like mortgage applications).

When do you need to register by?

This is the deadline people most often trip up on, so it’s worth getting clear.

You must register by 5 October after the end of the tax year in which you started trading.

Here’s what that means with a real example:

• You start your business in June 2026.
• That falls in the 2026/27 tax year (6 April 2026 to 5 April 2027).
• So you must register by 5 October 2027.

If you register late, or don’t register when you should have, HMRC can charge you a penalty. The honest advice from most accountants: don’t wait until the deadline. Register soon after you start trading so it’s done and off your mind.

What you’ll need before you start

Have these ready and the registration will go quickly:

• Your National Insurance number (if you don’t have one, you can apply for one on GOV.UK first).
• Your personal details — full name, date of birth, home address.
• Your business start date (roughly when you started trading).
• The type of work you do (for example, “plumber,” “graphic designer,” “online seller”).
• Your business name, if you’re using one (more on that below).
• An email address and a phone number.

A quick word on business names

You can simply trade under your own name (e.g. “Sam Patel”), or you can pick a business name (e.g. “Sam’s Cleaning Services”). If you choose a business name, the rules are:

• It can’t include “limited,” “Ltd,” “LLP,” or “limited liability partnership” — those are only for registered companies.
• It can’t be offensive or misleading.
• It shouldn’t be the same as an existing trademark.

On official paperwork, you include both your name and your trading name, like: “Sam Patel trading as Sam’s Cleaning Services.”

Step-by-step: how to register

The whole thing is done online through the official GOV.UK website.

Step 1 — Go to the official registration page.

Search for “register for Self Assessment” on GOV.UK, or go straight to the “Become a sole trader” guide and click “Start now.” Always use the real GOV.UK website — never pay a third-party site to do this for you, as it’s free directly with HMRC.

Step 2 — Set up or sign in to your online account.

You’ll sign in using GOV.UK One Login or a Government Gateway account. If you don’t have one yet, you can create it during the process. You may be asked to verify your identity (sometimes using the GOV.UK ID Check app), so it helps to have photo ID handy.

Step 3 — Tell HMRC why you’re registering.

When asked why you need to send a Self Assessment tax return, choose the option for being self-employed / a sole trader.

Step 4 — Confirm it’s your first time.

If you’ve never sent a tax return before, select that you’re registering for the first time.

Step 5 — Enter your details.

Fill in your personal information, National Insurance number, business start date, the kind of work you do, and your business name (if you have one).

Step 6 — Submit.

Check everything is correct, then submit. That’s it — the registration itself is done.

What happens after you register?

HMRC will post you a Unique Taxpayer Reference (UTR) — a 10-digit number that’s basically your personal tax ID. It usually arrives within about 10 to 15 working days (longer if you’re abroad).

Keep this number safe. You’ll need it every time you file a tax return or contact HMRC about your tax.

You can carry on trading while you wait for it — you just can’t file your tax return until it arrives.

Your responsibilities once you’re registered

Being a sole trader comes with a few ongoing jobs. None are difficult, but staying on top of them saves a lot of stress later.

Keep good records. From the day you start trading, keep track of all your income and expenses — invoices, receipts, and bank statements. You’re expected to keep these records for at least five years after the relevant tax return deadline. Good habits here make filing your tax return far easier and help you claim the right expenses.

File a Self Assessment tax return each year. Once registered, you submit a tax return for each tax year. The deadline for online returns and paying any tax you owe is 31 January after the tax year ends.

Pay your Income Tax and National Insurance. You pay tax on your profits (what’s left after business expenses), plus Class 2 and Class 4 National Insurance depending on how much you earn. GOV.UK has a free Self Assessment tax calculator to help you estimate this.

Two extra things to know

VAT

Most people starting out don’t need to worry about VAT. But if your turnover goes above £90,000 in a 12-month period, you must register for VAT with HMRC. You can also register voluntarily below that threshold if it suits your business (some clients prefer working with VAT-registered businesses).

Making Tax Digital (MTD) for Income Tax

The way sole traders report tax is changing. Under Making Tax Digital, affected sole traders must keep digital records and send quarterly updates to HMRC using compatible software, instead of doing everything once a year. It’s being rolled out in stages based on your income:

• From 6 April 2026: required if your income is over £50,000.
• From 6 April 2027: the threshold drops to £30,000.
• From 6 April 2028: it drops again to £20,000.

Even if you’re below these thresholds for now, it’s worth getting into the habit of keeping digital records early.

Quick FAQ

Does it cost anything to register?

No. Registering as a sole trader with HMRC is completely free.

How long does it take?

The online registration takes around 10 to 15 minutes. Your UTR then arrives by post within about 10 to 15 working days.

Can I be employed and a sole trader at the same time?

Yes. Your employer handles the tax on your salary through PAYE, and you declare your self-employed income separately through Self Assessment. Both are combined to work out your overall tax.

Do I need a separate business bank account?

It’s not legally required for sole traders, but it’s strongly recommended. It keeps your business and personal money separate and makes record-keeping much easier.

What if I stop trading?

You need to tell HMRC, and then you stop filing Self Assessment returns for self-employment.

Official sources

This guide is based on official UK government information. Always check GOV.UK for the latest rates and rules, as thresholds and deadlines can change:

• UK — Set up as a sole trader: step by step
• UK — Register as a sole trader
• UK — Business names
• HMRC — Self Assessment, Income Tax and National Insurance rates
• UK — VAT registration
• UK — Making Tax Digital for Income Tax

This article is for general information only and is not a substitute for professional tax or accounting advice. If your situation is complex, consider speaking to an accountant.